Modern Age - Fall 2015 - 57

CAN TAXES BE FAIR? SHOULD THEY BE?

C

ould the LVT generate enough revenue to replace the other
taxes on which governments now rely? That can be answered
in three ways: ethical, theoretical, and empirical. The ethical argument is that the state may be entitled to the product that results
from the activity of the community, but that it has no right to
what individuals have produced with their own labor and capital. The state should balance its budget by cutting expenditure,
just as the individuals do. The theoretical argument is that "All
Taxes Come Out of Rent" (ATCOR). This controversial idea is that
taxes must be paid from only the surplus, which is rent. Hence it
is more efficient to tax rent directly, rather than taxing labor or
capital or transactions and relying on the inefficient shifting of
the tax burden. The empirical approach is to attempt to calculate
the taxable value of land and, from that, estimate the tax revenue
that could be collected.
The standard data sources are heavily biased downward, as
spelled out by Mason Gaffney.16 It is easy to see, however, that land
rents could make a substantial contribution toward current government spending of $6 trillion. The median household resides
in a house worth about three times household income. The land
under the residence is about 40 percent of that value. Average
land values relative to income are higher than medians (land is a
luxury of the rich), so it is likely that the total value of residential
land exceeds total personal income and even gross domestic
product (GDP). This suggests that it would be possible to tax
away more than $1 trillion of land rents from residential property
alone. Add to that rents from commercial, industrial, public utility,
mineral, and agricultural land. Gaffney extends the rent concept
beyond land to include other socially created values, such as the

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Modern Age - Fall 2015

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